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Things To Remember While Buying A ULIP Tax-Saving Plan

ULIPs or unit-linked insurance products offer you insurance coverage coupled with an investment opportunity. These are market-linked products that can generate moderate to high returns in the long run. ULIPs are an excellent tax saving investment option. The downside of these products is the market risk associated with it. You need to exercise caution while choosing a ULIP plan.

If you are looking for an investment to save tax, ULIPs are your best bet. However, you need to consider the following factors before you decide which ULIP to invest in:

Parent Company

The financial health and track record of the company that you are investing in are critical factors to be considered. In the insurance industry, the financial health of a company is measured by its solvency ratio. IRDA recommends a solvency ratio of 150% but there are many companies that maintain a ratio in excess of this.

The trustworthiness of an insurer is also measured by its claim settlement ratio. IRDA publishes the claim settlement ratios of all life and general insurers operating in India. The claim settlement ratio is an indicator of the insurer’s commitment to its clients. When you choose an insurer with a decent claim settlement ratio, you can rest assured that they will deliver on the promises made to you.

People and Processes

ULIPs are long-term investment products which is why it is important to choose an insurer that displays long-term vision and commitment. Such companies will take better care of their employees and ensure that they stay with the company for longer durations.

Those insurers with a long-term perspective take better care of the investors’ money and refrain from taking unnecessary risks with the portfolio that they are invested in. The fund managers employed by such companies often display better commitment to protect the investors’ money. Such companies also have better systems and processes in place, and manage the funds better, even when the markets are going downhill. It is important to do some research about the insurers and their vision for the future, before you take a decision. The track record and the investment approach of the fund managers are also worth considering.


Price is another factor that needs to be considered. ULIPs carry a host of charges such as allocation charges, administration charges and fund management charges. It is important to compare the charges levied by various insurers before you make up your mind.

Performance of the Funds

The track record of the funds that you are planning to invest in is another important factor that should be considered. The rating of various funds should be analysed before you invest your money.
Additional read: How to invest in SIP?

ULIPs are one of the best tax saving investments in the market and can help you beat inflationary trends. But, make sure that you do a little bit of research before you decide on the ULIP to invest your money in.

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